Much has been made about competition getting fierce in the quest for streaming domination but maybe the race isn’t that competitive after all. This perspective comes from Bank of America analyst Jessica Reif Ehrlich, who thinks it is quite obvious who the winner in this game already is.
“It is becoming increasingly clear that Netflix (NASDAQ:NFLX) has won the ‘streaming wars,’” the analyst said. “Over the last 18 months, changing market dynamics, investor focus on profitability, and the various talent strikes have led several media companies to re-evaluate their streaming aspirations. These changes (e.g., reducing content spend/output, increasing third-party licensing) have been a tacit acknowledgement that not all media companies will be able to achieve Netflix’s global reach and scale in streaming.”
Ehrlich’s comments come ahead of the streaming giant’s Q4 print, set to be released after the close on Tuesday (January 23). To reflect updated FX, Erlich has adjusted her Netflix model, and is now calling for Q4 revenue of $8.79 billion compared to $8.69 billion beforehand, and operating income (OI) of $1.22 billion, also above the prior $1.16 billion estimate. The analyst’s CY24 revenue/OI estimates also get a bump, rising respectively to $39.5/$9.2 billion from $39.2/$9.0 billion. However, Erlich’s net add forecasts of +9 million in Q4 and +19.7 million in CY24 remain the same.
Ehrlich sees the availability of third-party content as one that is beneficial both to Netflix and the industry, enabling the company to reduce the financing of high-risk new productions, and focus more on “bets” with well-known established content. “Notably,” says Earlich, “the recent top 10 list from Netflix has been dominated by third-party content, underscoring the high hit rate that this content has on its platform.”
Additionally, Ehrlich points out that there are still significant opportunities to leverage the crackdown on password sharing, particularly in the near term, as well as in the field of advertising video on demand (AVOD) in both the medium and long term. Netflix’s recent announcement that its ad-supported tier has grown to 23 million active users, up from 15 million in November and just 5 million in May of the previous year, further supports Ehrlich’s bullish outlook on the long-term prospects of AVOD.
Additionally, there’s still more juice to be squeezed from the crackdown on password sharing (particularly in the near term) and advertising video on demand (AVOD), both over the medium-and longer-term. Netflix recently announced the ad-supported tier now has 23 million active users vs. 15 million in November and just 5 million in May last year and Earlich “continues to be bullish on the longer-term opportunity in AVOD.”
Bottom-line, ahead of
